Use the following information to solve the following questions:
During calendar 2020, Davel Corp. reported net income of $ 45,000 and paid total cash dividends of $ 15,000. Ryan Inc. owns 2,250 of the 7,500 outstanding shares of Davel and exercises significant influence.
-What amount should Ryan show in the investment account at December 31, 2020 if the beginning of the year balance in the account was $ 60,000?
A) $ 69,000
B) $ 73,500
C) $ 60,000
D) $ 90,000

Question

Quizplus · Accepted Answer

Ryan Inc. owns 30% of Davel Corp. (2,250/7,500), indicating significant influence. Under the equity method, Ryan should recognize 30% of Davel's net income ($45,000 * 30% = $13,500) and reduce the investment by 30% of dividends received ($15,000 * 30% = $4,500). The ending balance is $60,000 + $13,500 - $4,500 = $69,000.

Use the Following Information to Solve the Following Questions